Bonus or rights shares are declared frequently by companies. Bonus shares are declared from the free reserves and is a sign that a company is surely doing well.
Rights shares are declared by companies when they feel it necessary to raise capital for expansion purposes or to meet working capital requirements?
Bonus and Rights Shares for NRIs
A bonus share is a free share that is given to reward shareholders. Generally bonus is declared in a particular ratio. For example, a 1:1 bonus means the company will issue one share to a shareholder for every share he or she holds.
The important date to note during the bonus issue is the book closure date when the company will close its books and will allot the share to those whose names are in the books.
The issue of bonus shares may or may not impact the share price immediately. This is because while more shares are given to the shareholders, the share price would fall after the share go ex-bonus.